Steel Firms Say They Are Bullish On Demand, Prices After Coronavirus Crisis

The coronavirus pandemic pulled down the steel industry tailspin, but it quickly bounced back with a pick-up in domestic demand.

The initial months were, however, about strategising and surviving the demand destruction during the lockdown months. “We found out the right locations and the right products for exports, to remain in the game. So, we exported pellets and steel during this time because there was total demand destruction in the first couple of months. But whatever we did, it paid off,” said AMNS India chief executive officer, Dilip Oommen on Thursday.

“By middle of May we were at 100 per cent capacity utilization in all our assets,” said Oommen at the Bengal Chamber of Commerce & Industry’s virtual conclave Minerals, Mining and Metals.

Pankaj Malhan, CEO of Vedanta Electrosteel, said he hoped that the full capacity utilization levels would be sustained. “In terms of product portfolio, we are back to pre-Covid period.”

Vedanta Electrosteel had realigned its product portfolio to demand levels and customer preferences when the lockdown happened.

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The industry relied heavily on exports during the initial months of lockdown as domestic industries were mostly shut. The recovery since then has been sharp.

Soma Mondal, director commercial, Steel Authority of India Limited (SAIL), said, “Restoration of activities have taken place. In steel, we have seen a V-shaped recovery.” The demand surge, however, has led to a surge in prices that have now gone past peak levels of 2018.

In response to a question on increasing prices, Mondal explained that domestic prices were impacted by international prices besides the forces of demand and supply. “There is an increase in demand in the international market. Iron ore prices are at around $150 a tonne, which has an impact on global prices. Indian prices cannot be insulated from that,” she said.

Mondal also pointed out that because of the perked-up demand in the domestic market, steel companies had reduced exports substantially.

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The industry expects the strong demand to continue for the next few quarters. SAIL chairman, Anil Chaudhary, said, “Most companies in the first quarter posted losses; SAIL recorded a loss in the first quarter, but had a profit in Q2. The third quarter will also be good, given the good market conditions.”

“This year will be better than the last financial year for most players in the steel industry,” he added.

Prices of long products – used mostly by the infrastructure and construction – started moving up with the pick-up in activities.

The mood in the steel industry is upbeat so far as demand growth in India is concerned. Mondal said, so far as growth goes, India has real promise. The per capita consumption of steel in India is low, which leaves room for growth. In India, it stands at around 78 kg compared to a global average of 225 kg.

“We are quite bullish on the future of the steel industry in India. While we are expanding our pellet capacity to 20 million tonnes, we want to double the production at Hazira in the first stage and then we will look for brownfield and greenfield opportunities,” said Oommen.

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